Disputes and conflict are part and parcel of human society.  They are a normal and healthy phenomenon that occurs in the most efficiently-run businesses, but they can, if allowed develop over time, create chaos in the family.

Family businesses tend to ignore conflict.  Disputes get swept under the carpet instead of being openly discussed.  There is a dreaded fear of the outside world becoming aware of internal problems.

Conflicts tend to be more severe in the first generation after the Company is founded.  During the lifetime of the founder while the siblings were settling into succession he/she was around to settle disputes.  Often because of their unique position, that person could resolve disputes by decree and act as a judge, jury and executioner.

In later generations, the family will have survived a number of disputes and discovered, with or without professional help, a way of settling disputes as they arise.  In the process, they may discover that resolving individual disputes is not the problem per se.  The real challenge is to create structures that can resolve future disputes in a calm, orderly and healthy manner.

Some disputes can get out of control, and even end up in the law courts.  This “resolution” can often exact a high financial and emotional toll.  You cannot take your brother or sister to court and afterwards expect to have the same relationship with them.

Thankfully, there are two other courses of action – arbitration and mediation.

Arbitration

When two parties are in conflict and unable to settle it themselves, they can agree to submit to arbitration.  This is a less formal process than legal action where both sides agree in writing to submit their dispute to a neutral third party.

The arbitrator is often appointed by the president of a professional or business association.  Importantly for family business the proceedings which are governed by the Arbitration Act of 1954 are private.

Both sides are usually represented by counsel and a record is kept of the hearing.  The arbitrator’s decision is usually given within a few weeks of the hearing and is binding in a court of law.

Arbitration is cheaper than litigation but is still adversarial.  It is not the best way of resolving a business dispute if family members need to work together in the future.

Mediation

Mediation is an informal voluntary process where the participants agree to use a neutral third party to help resolve the conflict.

Mediation differs principally from arbitration in that it is the family members themselves rather than the third party, that come up with the ultimate solution.

The best results are achieved where parties decide to use mediation on their own initiative and before instituting legal action.  While the best results are achieved early in the  conflict, mediation can be started at any time in the process.

Mediation allows the parties to get together to decide the outcome of the dispute.  The mediator has no vested interest in the outcome.  He does not act as a judge or arbitrator, but merely helps the parties reach mutually acceptable settlement terms.  He will explore the emotional issues and try to develop solutions that are in the conflicting parties’ best interests.

The mediator is not hampered by inflexible legal rules.  Proceedings should be conducted through positive and co-operative negotiation, rather than destructive adversarial confrontation.

To be successful, those  with power to make settlement decisions must be involved in the process.

The mediation process

Conflicting parties agree to engage in the process and then they appoint a mediator.  He/she will call the parties to  a meeting where the procedures and ground rules are explained.  Each side is asked to express their view of the dispute.  This may be the first time that either party has listened to the other side’s point of view.

Families at war tend to be very emotional.  Some members may not even be on speaking terms.  The real issues are often clouded by emotion, relationships and perceptions of one another that go back to childhood.

The venting of these feelings and frustrations are encouraged by the mediator at the opening session to help determine the  real issues.  This can clear the air, and let the settlement process move forward.

After all sides have adequately aired their views the mediator will usually separate them and meet each side separately.  The mediator will urge each side to adopt an honest and positive approach to settlement.  He or she will try to identify the real issues and priorities in the conflict.

The mediator will move between the parties, seeking to bridge the gap between them.  If there is goodwill between the parties, an agreement will be reached.  Terms can then be drawn up in the form of a binding contract which is signed by all parties.

If a settlement cannot be reached, the dispute will probably move to arbitration or law.  If the latter occurs, the ground rules of mediation forbid either party from revealing any settlement details they discussed during that process, later in court.

The advantages of mediation

Mediation focuses on the future rather than the past.  By participating in the process, the parties feel they have contributed to the successful outcome and this in itself helps to restore damaged family relationships.  Other advantages are:-

­        Privacy : it protects the privacy of the family and helps to keep family business affairs away from the media.

­        Control: the family members feel they have more control over their affairs as the decisions will have been made by them rather than imposed on them by an arbitrator or judge.

­        Speed: the  whole process  is relatively quick and this allows the family to put the past behind them and get on with the family business without the disruption of distasteful quarrels hanging around them; and

­        Cost: each case is different, and the cost ultimately depend on the complexity of the issues and the time spent on reaching settlement.  Because it is informal – flexible and avoids the “law’s delays” it will certainly be a lot less expensive than going to court.

Mediation will not work well if either party fails to reveal material facts or suspects that the other has committed fraud.

A power imbalance between the two sides can also hamper a successful outcome.

Choosing a mediator

The Centre for Dispute Resolution at 79 Merrion Square, Dublin 2 is a non-profit organisation promoting the use of mediation in resolving commercial disputes and will help you select a suitable mediator.  A mediator must be neutral and perceived as impartial by all the parties.  He should have an appreciation of business affairs, be familiar with the characteristics of family business and experienced in working with family businesses.

A good mediator will be attentive to the emotional issues in family disputes and will have the skill to design creative solutions.

Colm Nagle and Teresa Tully are the family business counselling team with BDO Simpson Xavier.

Colm can be contacted on

01-4700141 or e-mail: - cnagle@bdosx.ie

Teresa can be contacted on

01-4700163 or e-mail: - ttully@bdosx.ie